Forward guidance is not dead: here’s what it tells us

For all the talk of the “death of forward guidance”, central banks are still providing a clear steer of how policy will respond under given circumstances. If the energy shock fades as we assume, the BoE and ECB seem likely to reverse course relatively quickly. But the Fed’s warnings of a wider inflation threat suggest that it might keep rates higher for longer, while the BoJ seems firmly set on a path to policy normalisation.